This commentary originally appeared in Fortune.
The news that the International Monetary Fund will become the first major international financial body to officially return to Russia since Putin’s invasion of Ukraine in February 2022 underscores the systemic pro-authoritarian impulses of the IMF and its tolerance to blunt violations of international law by Russia under its current managing director, Kristalina Georgieva, who needs to be replaced urgently. With the U.S. presidential election reaching fever pitch, the problem of Georgieva’s anti-Western bias can no longer be swept under the carpet.
The IMF’s decision to send an official mission to Russia represents far more than a symbolic victory for President Vladimir Putin. An IMF delegation pledging to visit Moscow for meetings with senior Russian officials next month provides not only a false veneer of legitimacy for the Kremlin at a time when other multilateral organizations are correctly shunning Putin but also the opportunity for his savvy economic officials to further distort the IMF’s representations of the Russian economy, which unsuspecting Western journalists have sadly echoed as fact. Furthermore, the IMF has inexplicably agreed to accept as the new Russian executive director a former Putin crony who is under U.S. sanctions.
As such, it is hardly surprising that Putin’s cronies are all but dancing in the streets and taking victory laps in celebration of the IMF’s false legitimization of the Kremlin. In fact, the news that the IMF would be returning to Russia was broken not by the IMF itself, but by the IMF Russian representative, who crowed to Reuters about how they “were excluded from the IMF under pressure from our Western friends” but still prevailed.
If this episode were an isolated incident, it would be concerning enough. However, it fits a longer pattern of pro-authoritarian favoritism and anti-U.S. behavior by the IMF under its embattled and divisive managing director Georgieva.
Georgieva’s authoritarian leanings have long been widely suspected. A damning 2021 investigation by WilmerHale implicated Georgieva in a data-rigging scandal to boost China’s business climate ratings during her previous tenure at the World Bank, with the investigators concluding that Georgieva exerted “undue pressure” to “make specific changes to China’s data points in an effort to increase its ranking at precisely the same time the country was expected to play a key role in the bank’s capital increase campaign,” amidst reports of rampant demoralization amidst staff. Georgieva denies any wrongdoing.
Under Georgieva, the IMF’s pro-authoritarian impulses became especially pronounced after Putin’s invasion of Ukraine. Even as other multilateral organizations were acting to ostracize Russia, the IMF, without setting foot in Russia and based only on Putin’s cherry-picked economic statistic releases, inexplicably provided a bullish forecast of economic growth in Russia which exceeded even the Russian Central Bank’s projections, leading the public to question the ability of Western economic sanctions to dent Russia’s economy even before those sanctions were fully implemented.
When we raised questions about the IMF’s forecast, alongside scores of professional economists who also expressed widespread alarm over the IMF’s methodology amidst significant media outcry, IMF economists privately admitted to us that they have no basis to make such projections, no special knowledge beyond what’s available to everyone else, and basically zero visibility into what is actually going on in Russia. Despite this admission, the IMF inexplicably continued doubling down on their pro-Russian economic forecasts, predicted that Russian economic growth would outstrip the entire Western world, and turned a blind eye to Putin holding back timely reporting of dozens of presumably unfavorable key national income statistics.
Since mid-2022, Putin has concealed previously provided, IMF-required national income statistics. These now-vanished metrics include foreign trade data (including those relating to exports and imports, particularly with Europe), oil and gas monthly output data, commodity export quantities, capital inflows and outflows, financial statements of major companies (which used to be released on a mandatory basis by companies themselves), central bank monetary base data, foreign direct investment data, lending and loan origination data, and other data related to the availability of credit.
Needless to say, the many dangers of rubber-stamping Putin’s economic statistics were obvious to virtually everybody except the IMF. Many sanctions economists warned against using Russian GDP forecasts, especially since their methodology is subject to constant and often unannounced changes and “recalculations.”
As Agathe Demarais, the global forecasting director at the Economist Intelligence Unit, has warned, “The real problem is in Western countries: Experts and media quoting Russia’s recession figures should probably take the time to question their data instead of amplifying the Kremlin’s talking points.”
Over the last two years, we have constantly surfaced economic indicators which contradict the IMF’s rosy projections and indicate genuine strain in the Russian economy, including in our latest publication this month with co-authors Anders Aslund and Michal Wyrebkowski.
Kristalina Georgieva’s anti-U.S., anti-Western, pro-authoritarian biases as managing director of the IMF have become too dangerous to be ignored. We are far from the first to express these concerns. Many Biden administration officials previously publicly expressed their lack of confidence in Georgieva’s leadership, and there have been widespread bipartisan calls for her ouster by top elected officials in the U.S.
Representative Patrick McHenry and the leadership of the U.S. House Financial Services Committee have called for Georgieva’s immediate removal this spring: “Ms. Georgieva’s tenure at both the World Bank and the IMF has been plagued by ethical lapses…at the IMF itself, Ms. Georgieva has presided over a period where the Fund has been missing in action when it comes to holding China accountable to international norms….Ms. Georgieva’s record of intervening in research on China’s behalf makes her unsuitable to safeguard the institution.”
Strangely, Georgieva secured a second five-year term at the helm of the IMF through what appeared to be shadowy backroom dealings, spurred by support from a cabal of European representatives with nary any public debate or consideration of alternatives.
The governance of the IMF, through the Board of Governors, has been grossly negligent in allowing such misconduct to continue for as long as it has—especially as the U.S. holds the largest vote by far, and NATO-allied countries control well over 50% of the vote, not even including Turkey or Hungary. Western countries should have demanded accountability and insisted on changes to reform the organization long ago.
Georgieva’s tenuous grip on power may be one of the few things both major political parties in the U.S. can agree upon. Either Kamala Harris or Donald Trump are poised to leave their own mark on the membership of the IMF Executive Board. Regardless of the U.S. election results, the next administration must work with ready and willing European allies to overhaul the IMF’s leadership—and put an end to its embrace of totalitarian villains.
“The Yale School of Management is the graduate business school of Yale University, a private research university in New Haven, Connecticut.”
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